Canada has lost its competitive edge.
This is the inescapable conclusion of the Senate Committee on Banking, Trade and Commerce’s latest report, which comes after eight months of senators studying the biggest issues facing importers and exporters in Canada.
The investment differential between Canada and its largest trading partner, the United States, is widening — and not in our favour. Our corporate income taxes are higher after the United States cut its corporate tax rate from 39.1% to 26% in 2017, undercutting the Canadian rate of 26.7%.
At the same time, individual income tax rates, looming carbon taxes and a lack of capital expenditure tax deductions, and a burdensome regulatory regime are proving to be barriers to investment in this country.
The results of this ever-growing differential are already being felt.
Investment in Canada has stopped — in fact, investors are fleeing the country. Major energy projects are dead or dying. It’s not just money leaving Canada; attractive businesses and individuals are heading south in favour of a warmer investment climate.
Something has to be done. Not for the sake of a few people working in office towers in major cities across this country, but for every single Canadian, no matter where they work or live.
If Canada is not competitive, our economic prosperity as a nation is at risk — and consequently, so are our citizens.
The federal government must therefore act with dispatch to equalize the investment differential between Canada and the United States.
It is time to overhaul our taxation system. The last Royal Commission was undertaken in 1962. Much has changed since then — yet, our foundational taxation system remains the same. Sure, we’ve made additions, renovated bathrooms and replaced the odd electrical supply outlet but more piecemeal renovations won’t restore Canada’s competitiveness in the modern, digital world. It’s time to rebuild from the ground up.
That’s why one of the key recommendations in our report, Canada: Still Open for Business? is for the federal government to launch a Royal Commission on Taxation, to be completed in no less than three years.
But even if that review is completed on time, it won’t come soon enough to reverse the current trends. The federal government therefore must also begin work on our five other recommendations to: encourage investment, streamline regulatory regimes, help companies commercialize intellectual property, improve our trade infrastructure and step up trade with emerging markets.
When Finance Minister Bill Morneau releases his fall economic update, I urge him to announce the federal government’s intention to adopt and immediately implement our six recommendations. Failure to do so will put at risk the economic prosperity of our country.
I ran in Alberta to become a senator for one reason: to ensure the Canada we leave to our children and grandchildren offers the same opportunities it has afforded me. If the federal government does not take steps now to reverse the challenges facing Canada’s competitiveness, I fear for our future.